General Electric (GE) is at a crucial technical level, having retraced 50% of the downfall from its 2009 low. Serge Berger explains why this is the stock to watch today for a jump.
Hi everyone, it’s Serge from The Steady Trader. The trade idea I want to look at today is in General Electric. That’s the big industrial firm, ticker symbol GE, market cap $245 billion.
If you look at the movement the stock has done off 2009 lows, much like the broader market. In fact, the stock has a very close correlation to the broader market, so no surprise there that it’s moving in line. What’s important here is that from a longer-term perspective here—looking at a multi-year chart all the way back to the drop at the bottom here in 2009—if we draw a simple retracement line, we’ll see that the stock has now retraced exactly 50% of the entire downfall from 2007 until the bottom in 2009. So from a longer-term point of view, the stock has arrived at a very important spot.
If we now zoom in closer—so here’s a daily chart, in other words, daily bars of General Electric and again, you note that off 2013’s April lows, the stock has rallied sharply along with the rest of the broader market. We’ve now reached a pretty important point also on this shorter-term horizon. Remember the chart we just looked at? Again, we just looked at the area right here. Anywhere between 23 and 24 is major resistance on a multi-year point of view. But also here near-term in 2013 as we have so far is a double top. Very simply put, we can draw a simple line and you’ll see somewhere near 23.90. If we were to overcome that on a daily closing basis, the stock is breaking out.
Now, even more important is if we zoom in even closer. The stock has basically been consolidating and coiling up here since the Bernanke top on May 22. From this point of view, this is a simplistic way to look at it, but in my point of view, quite effective. We have a bit of a wedge here. If the stock closes above 23.90 it should move higher. How high could it go? At this point, I don’t want to be too greedy given where the overall market is, but the stock could easily get to the 24.50 or the 25 area given the fact that it’s a huge company and it’s a huge market cap.
It tends to move a little bit slower, but nonetheless this is a breakout I’m looking at today. Not to be confused with a crazy bullish breakout if the market was any better, but a breakout potential nonetheless.
I hope this makes sense. Have a great trading day and take care.